Youbet.com Inc. must pay about $1.3 million to its license partner TVG for underpayments during a three-year content agreement that ended March 31, 2005, an arbiter ruled Nov. 16. TVG initially claimed it was owed $5.8 million.
The arbitration figure included damages, reimbursement and interest, according to TVG. The ruling separately included $90,000 that TVG must pay to Youbet, which said TVG was cited for violating the Securities Exchange Act of 1934. TVG called it a payment for "short swing profits" that occurred in March 2004 when TVG surrendered a pre-existing warrant for shares of Youbet in a transaction between the parties.
Charles F. Champion, Youbet CEO, hailed the arbitration decision, saying it affirmed his company's understanding of key provisions regarding host, license and transaction fees.
"From the onset, we had an obligation to defend ourselves against TVG's claims, and the non-financial claims were potentially more damaging to our ongoing value than the monetary claims," he said. "At the same time, we had a series of important business principles to assert, and we were successful.
"With this ruling, our company is better positioned for the long-term, both financially and strategically. In turn, that means we can continue to develop marketing programs where tracks and horsemen are equitably compensated for their content."
TVG declined comment.
The arbiter found that TVG should only receive license fees from tracks that are "exclusive" to the television network, and for only as long as TVG owns the exclusive rights, Youbet said in a press release.
According to the release, the Arbitrator also ruled that, to the extent that host fees set by tracks to obtain consents from horsemen exceed 3%, the overage is to be counted against the 8.5% cap charged by TVG. If total host, licensing and transaction fees exceed 8.5% of handle, then TVG's license fee is reduced accordingly.
In addition, the arbitrator ruled that Youbet should reduce license fees payable to TVG to avoid losing money on California-based wagers.
There is no appeal of the ruling, which was rendered by the American Arbitration Association. However, Youbet and TVG have 20 days to ask the arbiter to correct clerical or computational errors.